Fitch Ratings - Dubai: Oman’s Islamic finance industry is likely to experience double-digit growth in 2026, supported by favourable economic conditions, the continued importance of sukuk as a funding and policy tool, government initiatives, and bottom-up public demand for sharia-compliant products, Fitch Ratings says. Sukuk were the majority of all US dollar debt issuance in 2025 at about 60% (2024: 94.3%), with the rest being bonds. Key structural constraints persist, including a lack of Islamic treasury bills and derivatives, an underdeveloped Omani riyal sukuk and bond market, and the limited presence of Islamic non-bank financial institutions.

We estimate that the Omani Islamic finance industry reached about USD36 billion at end-2025 and could approach USD45 billion in 2026. Islamic banking assets represent about two-thirds of the total, followed by outstanding sukuk (about 32%). The wider ecosystem remains nascent: takaful and Islamic asset management are small, together accounting for about 2.5%.

The Central Bank of Oman (CBO) recently approved a regulatory framework for sharia-compliant finance and financial leasing companies. Clear regulation and stronger oversight could create an enabling environment, raise investor and stakeholder confidence, and attract capital.

The market share of Islamic banks and Islamic windows of conventional banks rose to about 20% of system assets at end-November 2025 (2024: 19.2%). Islamic banking assets reached USD24.1 billion, with growth outpacing that of conventional banks. Islamic windows at six conventional banks held more than 60% of Islamic banking assets in 2025, benefitting from their parents’ established franchises and infrastructure. The CBO recently launched an electronic system which provides sharia-compliant liquidity-management tools for Islamic banks.

Business conditions remain favourable for Omani Islamic and conventional banks, supported by high, but moderating, oil prices. The authorities' commitment to diversifying the economy as part of Vision 2040 should provide growth opportunities for banks. Fitch expects sector loan growth of 6%-7% in 2026. This will be driven by higher demand in both the retail and corporate sectors, the latter in line with government spending on energy and infrastructure projects. The authorities have a high propensity to support the banking system.

The proposed 5% income tax from 2028 is likely to have a small overall impact on banks. However, Islamic banks could be marginally more affected due to their higher retail focus.

Fitch upgraded many Omani sukuk following Oman’s December sovereign upgrade to ‘BBB-’. Fitch rated about USD6.5 billion of outstanding Omani sukuk at end-2025, with 88% rated ‘BBB-’, 12% rated ‘BB+’, all issuers on Stable Outlooks, and no defaults. Demand for sukuk is supported by GCC Islamic and conventional banks. Oman Electricity Transmission Company issued Oman’s first green sukuk (BB+) in 2025. No ESG bond has been issued to date. Oman’s first Islamic commercial paper was also issued in 2025.

Oman’s debt capital market is the GCC’s smallest. We expect Oman’s debt/GDP ratio to rise to 35.8% in 2025 (2024: 35.4%) and to hover around that level until 2027 (2020: 67.9%). The authorities aim to bring debt close to 30% of GDP. They also aim to gradually increase the share of domestic debt by developing the local market and refinancing part of upcoming external debt maturities in riyals. This plan includes regular scheduled issuances on the local market, a revision of the regulatory framework, and greater participation in international clearing mechanisms to attract global investors to the local market.

The Financial Services Authority established the Supreme Sharia Supervisory Authority, which recently reviewed the draft insurance law, in 2025. Assets under management in Islamic funds remain small at about USD575 million as of January 2026, according to IFN Investor. The takaful sector had an 18% share of gross direct premiums as of end-2024.

Contact:
Saif Shawqi, CFA, FRM
Director – Islamic Finance
saif.shawqi@fitchratings.com
Fitch Ratings – Dubai Branch
Maze Tower, 18th Floor
Sheikh Zayed Road, P.O. Box 215584, Dubai, U.A.E.

Bashar Al Natoor
Managing Director – Global Head of Islamic Finance
bashar.alnatoor@fitchratings.com

Media Relations: Matthew Pearson, London, Email: matthew.pearson@thefitchgroup.com
Shahd Alsheikh, Riyadh, Email: shahd.alsheikh@thefitchgroup.com

Additional information is available on www.fitchratings.com